New York Markets After Hours

China’s industrial profit rebounds in October

ChrisOliver

Reuters

A ZTE factory in Shenzhen, China.

HONG KONG (MarketWatch) — Chinese industrial companies’ profits jumped in October — rising more than 20% from a year earlier and nudging into positive territory for the first 10 months of the year — bolstering a bullish view on the future of Chinese corporations and the broader economy.

Large industrial enterprises, or those with annual income of at least 20 million yuan ($3.2 million), reported profit of 500.1 billion yuan for the month, a rise of 20.5% from October 2011, the National Bureau of Statistics said Tuesday.

Bank of America-Merrill Lynch analyst Ting Lu said the data added to evidence of a rebound in China’s economy, and he expected other economists “to revise up their growth forecasts soon.”

Lu said the rebound was driven in part by falling raw-material prices, but also by a softer statistical comparison base a year earlier, which added a bit more sparkle to the October data.

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He said that the rebound was also supported by a pick-up in exports and a turn in the inventory cycle, with companies now seeking to rebuild stockpiles of goods after hefty drawdown.

“Robust earnings growth in October lends further support to our above-consensus GDP growth forecasts in general and margin improvement views in particular. Going forward, we expect the street to turn more positive on short-term economic and earnings growth,” Lu said.

In the January-October period, profit for these companies totaled 4.024 trillion yuan, a rise of 0.5% from a year earlier, reversing from a 1.8% year-on-year decline in the previously reported January-September total.

The details showed profit at state-owned industrial enterprises of 1.127 trillion yuan in the in January-October, a drop of 9.2% from the same period last year. However, private companies’ profit for the 10-month segment rose to 1.262 trillion yuan, up 17% from a year earlier.

Despite the upbeat reading from Lu and others, Chinese stocks drew little support from the news, with the Shanghai Composite Index
000001, -3.06%
trading weaker at the open before coming under accelerated selling pressure. By the midday trading break, the index sat at 1,998.20 — below the psychologically important 2,000-point level and down 1% from its Monday close.

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